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2016 (3) TMI 205 - AT - Service TaxRefund claim - Service tax paid on royalty by the transferee company M/s Usha International Ltd. (UIL) to transferer company M/s Jay Engineering Works Ltd. (JEW) on the basis of the High Court order dated 26.5.2008 approving merger of the erstwhile UIL and M/s Shree Ram Fuel Injections Ltd. (SRFIL) with JEW with effect from 1.4.2007 - Registrar of Companies, National Capital Territory of Delhi & Haryana, Ministry of Company Affairs, approved its change of name of JEW to Usha International Ltd. from 20.6.2008 - Revenue contended that M/s JEW worked as an independent company up to 20.6.2008 and therefore service tax was payable and correctly paid by it - Held that the appointed date as per amalgamation scheme i.e. 1.4.2007 is required to be the date of amalgamation/merger and not the date on which entire formalities were completed. Therefore, the service rendered during the period 1.4.2007 to 31.3.2008 became service to self and consequently service tax paid during the said period became eligible for refund. Refund claim - Doctrine of Unjust Enrichment - Appellant contended that it was neither a manufacturer of goods nor was it providing any service (which utilized the impugned service) during the relevant period and no Cenvat credit was taken of the service tax, the refund of which was sought and therefore the presumption contained under Section 12B of the Central Excise Act made applicable to Service Tax Act do not apply - Held that every refund has to be tested on the yardstick of the doctrine of unjust enrichment in terms of Section 11B of Central Excise Act read with Section 83 of the Finance Act, 1994. Here as per Section 12B ibid the appellant do not cover within the scope of this section. The refund in this case is arising on account of the fact that the effective date of merger/amalgamation is to be treated as 1.4.2007 making service rendered during the relevant period for which royalty was paid as service to self. As the service was rendered to self and service tax was paid thereon, burden can only passed on to self and passing on the burden to self is not tantamount to passing it to any other person. Therefore, the appellant is not hit by the doctrine of unjust enrichment. - Decided in favour of appellant
Issues Involved:
1. Refund Claim of Service Tax Paid on Royalty Post-Merger. 2. Doctrine of Unjust Enrichment and its Applicability. Issue-wise Detailed Analysis: 1. Refund Claim of Service Tax Paid on Royalty Post-Merger: The appellant sought a refund of Rs. 84,76,586/- for service tax paid on royalty by M/s Usha International Ltd. (UIL) to M/s Jay Engineering Works Ltd. (JEW) following a merger approved by the High Court effective from 1.4.2007. The primary adjudicating authority initially sanctioned a refund of Rs. 71,74,496/-, but the Revenue appealed, leading to a remand for further documentation. The primary authority then rejected the refund, prompting the appellant to appeal, arguing that post-merger, the service tax paid amounted to a service to self, hence non-taxable. The Tribunal found that the High Court's order approving the merger effective from 1.4.2007 meant the service rendered during the period from 1.4.2007 to 31.3.2008 was indeed a service to self, making the service tax paid refundable. This conclusion was supported by the Supreme Court's judgment in Marshall Sons & Co. (I) Ltd. Vs. Income Tax Officer, which held that the date of amalgamation specified in the scheme should be the effective date unless the Court specifies otherwise. The Tribunal also cited similar judgments from the Andhra Pradesh High Court in State of A.P. Vs. Jindal Strips Ltd. and CESTAT in Commissioner of Service Tax, Delhi-I Vs. ITC Hotels Ltd. 2. Doctrine of Unjust Enrichment and its Applicability: The appellant contended that there was no unjust enrichment as certified by a Chartered Accountant, asserting that no Cenvat credit was taken, and the service tax burden was not passed on to any other person. The Tribunal examined Section 12B of the Central Excise Act, which presumes the incidence of duty has been passed on to the buyer unless proven otherwise. However, the Tribunal found that this presumption did not apply to the appellant, as they were not a manufacturer or service provider during the relevant period. The Tribunal further analyzed Section 11B(2) of the Central Excise Act, which requires proof that the burden of duty was not passed on to any other person for a refund to be granted. The Tribunal accepted the Chartered Accountant's certificate as sufficient evidence in this case, noting that the price of goods depends on various factors and cannot conclusively indicate the passing on of the tax burden. The Tribunal referenced the Supreme Court's decision in Allied Photographics India Ltd., which held that price uniformity alone does not prove the incidence of duty has been passed on. The Tribunal concluded that since the service was rendered to self post-merger, the doctrine of unjust enrichment did not apply, and the refund was admissible. Consequently, the Tribunal allowed both appeals, granting the refund of Rs. 71,74,496/- and setting aside the order for its recovery along with interest and penalties.
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